Shipping laws leave much to whine about

The Carroll County Times posted the article below about this year's direct wine shipping bill and Maryland’s three-tier system:

Shipping laws leave much to whine about
Sunday, January 31, 2010

Marc Austin said he has done a little browsing on a wine Web site, hoping to score some bottles that weren’t at his normal liquor store and search for deals.

But once he typed into the Web site that he lived in Woodbine he was quickly informed that it is a felony to ship wine directly to consumers in Maryland — one of just a handful of states with such a policy.

Austin said he gave up on the quest for those bottles and instead is waiting to see the laws changed in Maryland so he and other wine drinkers and Maryland wineries will benefit from more open commerce.

“It takes away opportunities to drink wines from all over the country,” Austin said of the current law. “Interest [in wine] is up. There’s a market there that wasn’t before.”

Thirty-seven states in the country have laws that allow consumers to purchase wine online or from a winery and have it shipped directly to them, but Maryland has continued to hold out.

For almost three decades, small groups have been lobbying the Maryland General Assembly to change the law so that wine drinkers could gain access to the estimated 85 percent of domestic wines not carried by wholesalers in the state.

Maryland wineries have testified that lifting the ban on interstate shipping would also give them the freedom to increase sales outside of the state, and even be able to serve patrons within the state who may have tried a bottle on a visit or at a restaurant and want to purchase more — without the drive.

Most years, a handful of consumers would come to the hearing to speak in favor of the bill, with the rest of the room filled with liquor store owners and representatives from wholesalers, speaking against the issue.

For supporters, the bill is an issue of freedom of choice and flexibility granted to most other Americans. But opponents say it’s merely an attempt to overturn the state’s whole system of alcohol distribution — one that was set up to prevent monopolies of alcohol distribution in the state and prevent minors and those who are intoxicated from purchasing alcohol.



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The bill will return to Annapolis this session, and the proponents, who have been working hard to organize and unite supporters, are hoping that this will be the year when direct-to-consumer shipping will finally be passed.

Maryland’s three-tier system

Since Prohibition ended in 1933, Maryland has used a three-tier system of alcohol distribution that requires all materials to go from a manufacturer to a wholesaler that distributes it to a retailer before reaching a consumer.

One of the few exceptions to the three-tier system is for “farm wineries,” which may sell their own products at their location and directly to retailers, a right accorded to them in 2006. At the same time, restaurants and retailers were also granted the ability to start purchasing wine directly from out-of-state wineries rather than using wholesalers. ??

The three-tier system works well enough for wineries that sell to retailers within their own state but makes it difficult for them to get a larger following outside of their local area. Small wineries, lacking the funds to do much marketing, aren’t attractive to wholesalers, and their wines don’t make it to retailers in Maryland or to consumers.

According to Marylanders for Better Beer & Wine Laws, 85 percent of domestic wines aren’t available in Maryland because of the existing alcohol distribution and permitting system.

For most wine drinkers, the 15 percent that is available is more than enough variety, but at times, even the casual wine drinker could come across problems.

If Maryland residents were to travel and find a winery they would like to buy a case from, but can’t take it with them at the time, the winery wouldn’t be able to ship the wine directly to the traveler’s home address. Marylanders can’t join “Wine of the Month” clubs that are shipped via the mail, either, and technically aren’t allowed to drive back into Maryland with more than a quart of wine with them at a time.

The direct wine seller’s permit

In the past decade, the state introduced a Direct Wine Seller’s permit, which was designed to allow consumers to purchase wine directly from a winery. However, the process requires the out-of-state winery to apply to the state to get the Direct Wine Seller’s permit, find a wholesaler in the state to agree to be the mediator and sign off on the application, and get the consumer’s chosen retailer to agree to accept the package.

Jeff Kelly, director of the field enforcement division of the comptroller’s office, said only a few wineries have applied for this permit, and he believes three wholesalers have agreed to be the mediators.

“It’s a system that could work, but it’s not used a whole lot,” Kelly said.

Kelly said he believes the system isn’t used more because it is misunderstood. Many Web sites list Maryland as being a felony state when it comes to shipping alcohol, he said, and while that is partly true, it prevents businesses and consumers from learning how to legally achieve their desired transactions.

“There is a mechanism. If you truly found a wine you absolutely love, there is a mechanism to get it here, and that mechanism is working,” Kelly said. “Whether or not this process could be improved, I suspect it could be improved, and maybe with the electronic age it could be even better still. But there is a process, there is a system that allows people to get [wines] into Maryland.”

Adam Borden, executive director of Marylanders for Better Beer & Wine Laws, said the process is legitimately confusing, which is why no one wants to get involved with it.

“To say that the Direct Wine Seller’s permit is an abject failure is probably the understatement of the year,” Borden said. “You don’t go through that process for any other type of good.”

Borden said he learned through a Public Information Act request of the comptroller’s office that since the Direct Wine Seller’s permit was enacted, the state collected $150 from excise tax and permits — the equivalent of about 66 cases of wine. New Hampshire, on the other hand, collected more than $500,000 in one year from tax on direct shipping of wine, he said, showing what the potential could be in a program that allows consumers more access.

Creating a new shipper’s license

While there has been discussion on streamlining the Direct Wine Seller’s permit process, Borden said his organization is supporting a bill that would get rid of it and replace it with a “Direct Wine Shipper’s License.”

The license would allow a winery or retailer to ship directly to a consumer, using a shipper such as UPS or FedEx, requiring a box to be labeled as having alcohol and requiring the carrier to check ID and get a signature from the recipient, who must be 21 years of age or older.

“It’s been seven years, and still hasn’t worked, plus the fact that it is not in alignment with other states,” Borden said. “I just don’t see the need to spend any more time on it — it’s clear that it needs to be scrapped and rewritten, and that’s what we’re proposing.”

Reach staff writer Carrie Ann Knauer at 410-857-7874 or carrie.knauer@carrollcountytimes.com.

How out-of-state wines arrive in Maryland

There are currently three types of permits that allow wineries to sell wine from out of state in Maryland.

Permit No. 1

The Non-Resident Dealer permit is typically used for wineries to sell to Maryland wholesalers, costs $100 annually and is held by about 1,100 entities.

Permit No. 2

The Non-Resident Winery permit allows direct shipping to retailers but is not widely used because retailers are not accustomed to ordering direct — a process that entails more paperwork and calculating a higher mark-up. The permit also costs $100 annually and is held by about 50 entities.

Permit No. 3

With the Direct Wine Seller’s permit, the winery and consumer have to find a wholesaler and retailer in the state that meets the Alcohol and Tobacco Tax Division’s requirements and be willing to take part in a deal that has little incentive for them.

Step 1: The winery applies for the Direct Wine Seller’s Permit, which is $10 annually, and designates a cooperating wholesaler to facilitate the delivery to a licensed retailer. The winery may only choose one wholesaler in the state, and get their signature on the application form before submitting it to the state.

Step 2: The wholesaler must assure delivery of the product from the winery is made only by a licensed public transportation permit holder. In its paperwork, the wholesaler must file its monthly tax return with a detailed summary of all shipments facilitated on behalf of the Direct Wine Seller permit holder.

The wholesaler must make the delivery of the wine to the licensed retailer on the next delivery date after receiving the shipment. For their services, the wholesalers can impose a service charge, to be paid by the consumer, for $2 per bottle, but not more than $4 per shipment.

Step 3: The retailer, who must check ID to confirm that the wine purchaser is 21 years of age or older, can impose a service charge to the consumer of $5 per bottle, but not more than $10 per shipment.

The Maryland Comptroller’s office said that most wholesalers and retailers are not imposing the extra fees.

Source: Maryland Comptroller’s office and Marylanders for Better Beer & Wine Laws

Wineries with Permits

Wineries Able to Ship to MD

Here is a link to the Comptroller's website. Search for "DW-Direct Wine Shippers Permit" under permit type.

Search for wineries

 

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